July witnessed significant activity in the AI acquisitions space. Notable among these was the high-profile $2.4 billion transaction involving OpenAI, Cognition, and Windsurf. However, developments extended even into the services industry, marked by a substantial deal with noteworthy implications for the Indian IT sector.
Paris-based Capgemini announced the acquisition of WNS for $3.3 billion in cash. This move goes far beyond a typical BPO deal; it’s a bet on agentic AI, and yet another wake-up call for Indian IT firms, many of which are sitting on billions of dollars of idle cash.
As of June, India’s five largest IT services firms, namely TCS, Infosys, Wipro, HCLTech and Tech Mahindra, collectively hold over $20.6 billion in cash and investments.
TCS leads the pack with $5.6 billion, followed closely by Infosys at $5.33 billion and Wipro at $4.61 billion. Meanwhile, HCLTech sits on $3.16 billion, while Tech Mahindra holds $1.9 billion.
That’s more than ₹1.7 lakh crore in financial firepower—yet merger and acquisition (M&A) activity remains timid at best.
Despite an 18% increase in M&A volume in India during 2024, the overall value of those deals dropped, reflecting an industry that prefers safe bets over bold moves. Most acquisitions were mid-sized, quiet and private.
No Interest at All
HCLTech CEO Vijayakumar C had emphasised back in February that AI’s disruption in IT services is unlike previous technological shifts such as cloud computing and digital transformation. He warned that Indian IT firms must become increasingly “paranoid”.
“The changes AI is assuring are very different, and we need to be more proactive to even categorise our revenues to create completely new businesses,” he said.
HCLTech is slowly moving in that direction, as it announced its biggest partnership yet with OpenAI to deliver AI services for its clients. Yet, arguably, that’s not enough.
This cautious approach has become characteristic of Indian IT firms as they choose to either develop AI capabilities in-house, which takes a lot of time considering it is stuck with PoCs, or partner with AI startups for the same. In the end, these efforts rarely translate to anything beyond modest revenue contributions.
In sharp contrast, the Capgemini-WNS deal shows confidence in the long-term value of domain-specific knowledge, process excellence and scalable AI integration.
Indian IT majors shy away from such strategic bets while sitting on single-digit growths since 2023. That mindset, many believe, needs to change.
Ramkumar Ramamoorthy, partner at Catalincs and former chairman and MD of Cognizant India, believes Indian IT is sitting on a generational opportunity—and might just sleep through it. With revenue growth stuck in the low-to-mid single digits for a second consecutive year, he argues it’s time the industry put its sizeable cash reserves to more strategic use.
“It is estimated that the Indian IT services companies generate approximately $20 billion in free cash flow and more than 75% of that is returned to shareholders,” he wrote in a LinkedIn post. This money, Ramamoorthy insists, could do more than just reward investors.
He proposes two ambitious ideas: first, Indian IT could act like venture capitalists.
“Could they use their substantial cash flows as ‘risk capital’ (akin to what Alibaba or Tencent did) to take minority stakes in promising next-gen companies that are into products, platforms, deep tech and more?” he asked rhetorically, while adding that Indian IT’s leadership and operational expertise would make them ideal mentors for startups.
Next, he calls for a coalition of cash-rich IT firms to build India’s own tech infrastructure and invest in building the country’s own compute, AI, cloud, and cyber infrastructure, thereby benefiting from it. He also challenges the conventional view that IT services don’t need significant reinvestment due to their asset-light model.
“While this reasoning holds, the landscape is changing…Isn’t now an opportune moment for companies to capitalise on these shifts by reinvesting in the business and leaping into the future instead of playing by yesterday’s rules?” he asked.
Time to Go Big
The risk, Ramamoorthy warns, isn’t just about missing out on big returns. It’s about missing the future.
“If we don’t act now, we risk looking back in regret for having missed a generational opportunity. Worse still, we may find ourselves caught in ‘techolonisation’—a future of dependency on others for our technology needs and opportunities!”
This is exactly the kind of transformative plays needed in the age of generative AI and automation. During the acquisition announcement, Aiman Ezzat, CEO of Capgemini, said that WNS will provide the group with the scale and vertical sector expertise with agentic AI-powered intelligent operations focusing on the US market.
It seems increasingly evident that while global peers like Accenture, ServiceNow, and now even Capgemini are aggressively acquiring AI-ready assets and process IP, India’s top tech companies remain curiously passive, sitting on piles of cash with little intention to deploy it strategically.
This year, ServiceNow acquired Moveworks for $2.5 billion and Logik.ai specifically for generative AI and agentic AI capabilities. Accenture, with its billion-dollar AI deal pipeline, has acquired Halfspace, announced plans to acquire Yumemi, and invested in YearOne this year alone just for AI capabilities.
Cut to their latest earnings call—AI now accounts for a significant share of their revenue.
Even Cognizant is slowly reinventing itself as a ‘vibe coding’ company with increasing collaborations with Lovable and Windsurf and running one of the largest AI hackathons using AI tools. LTIMindtree, however, invested $6 million in Voicing AI in December 2024 for AI capabilities, but showed little momentum since.
No one’s expecting Indian IT to take reckless risks. However, when even companies like Cognizant begin to resemble startups, while many Indian IT firms remain cautious, it stresses a gap in approach.
As Ramamoorthy suggested, if these firms don’t start acquiring talent, instead of simply billing hours, they could risk losing relevance within the next decade.
The post Indian IT Sits on $20 Bn Cash as Accenture, Capgemini Keep Buying AI Startups appeared first on Analytics India Magazine.
